The winners in business have shifted markedly in the past decade—and the keys to success are likely to be very different again in ten years’ time. How should leaders prepare their companies to thrive in a rapidly evolving landscape? What will it take to win the '20s?

Stop Trying to Control People or Make Them Happy

Whether you’ve heard of them or not, two gurus from the early twentieth century still dominate management thinking and practice — to our detriment. It has been more than 100 years since Frederick Taylor, an American engineer working in the steel business, published his seminal work on the principles of scientific management. And it has been more than 80 years since Elton Mayo, an Australian-born Harvard academic, produced his pioneering studies on human relations in the workplace. Yet managers continue to follow Taylor’s “hard” approach — creating new structures, processes, and systems — when they need to address a management challenge. Hence, the introduction of, say, a risk management team or a compliance unit or an innovation czar. And when managers need to boost morale and get people to work better together, they still follow Mayo’s “soft” approach — launching people initiatives such as off-site retreats, affiliation events, or even lunchtime yoga classes. If these approaches made sense in the first half of the twentieth century (and that’s open to question), they make no sense today. Indeed, if anything, their continued use is making things worse.

We are living in an age of mounting complexity. By our calculation, companies are operating in a competitive environment that is six times more complex than it was in 1955, when the Fortune 500 was launched. For the best companies, this complex world is an opportunity to gain a competitive advantage over their rivals. But for too many companies saddled with approaches to management that are outdated and ineffectual, it presents a seemingly insurmountable challenge.

As they have responded to each new challenge, managers (as Taylor recommended) have introduced new structures, processes, and systems. When this happens year after year, there is a damaging accretion of structural fixes — we estimate that the number of these has grown by a factor of thirty-five over the past 55 years. The consequence is what we call “complicatedness,” which spells trouble for a company’s productivity and leads employees to feel frustrated and to disengage. In the most complicated 20 percent of companies, employees spend large chunks of time on aimless activities that do not add value: For instance, writing reports or participating in internal meetings that have no impact.

There is, however, an alternative, a third way — one we call “Smart Simplicity.” We’ve developed this approach over the past 30 years of working with 500 companies in more than 40 countries around the world, and we introduce it in a new book called Six Simple Rules. With “Smart Simplicity,” we put the cooperating individual at the heart of the modern organization. Where the Taylor school implicitly distrusts the individual worker and designs structural fixes for controlling their actions in a top-down, rigid, micro-managing way — albeit ameliorated by the softening effects of the people initiatives propounded by the Mayo school — we promote a radically different approach.

1. Understand what your people do: Start with a true understanding of what your people do and why they do it.

2. Reinforce integrators: Foster cooperation by giving people the power and interest to do so.

3. Increase the total quantity of power: Create new power, don’t just shift existing power.

4. Increase reciprocity: Ensure people use their autonomy.

5. Extend the shadow of the future: Create direct feedback loops.

6. Reward those who cooperate: Make transparency, innovation, and aspiration the best choices for individuals and teams.

No amount of structures, processes, and systems are ever enough to anticipate the kinds of problems employees face every day on the front line of the business. So, instead, companies need to give their employees more autonomy and, at the same time, encourage them — impel them, even — to cooperate with each other. Only then, when they are liberated in this way, will employees be able to make critical judgments, balance complex tradeoffs, and come up with creative solutions to new problems.

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